Mothercare has had to update the city regarding its announcement on 1 June 2018 that creditors had approved a proposed CVA that will result in 50 stores closing down.
Further scrutiny of the vote has shown that not enough creditors supported the CVA plans for Childrens World Limited, a subsidiary of Mothercare purchased in 1996 from Boots.
Childrens World received a 73.3% majority, rather than the required 75%. Mothercare stated that the “… [Childrens World] CVA proposal will not therefore progress any further.”
Two other limited companies are involved in this CVA, Mothercare UK and Early Learning Centre. In these cases plans were supported by creditors, however, the exact results have not been disclosed.
Clive Whiley, Interim Executive Chairman of Mothercare plc, said: “KPMG have confirmed the votes relating to MUK and ELC CVA’s passed by a clear majority, however it is now clear that the CVA of Childrens World was not carried by creditors by a narrow margin. This will neither unsettle the UK Restructuring and Refinancing nor jeopardise our future transformation plans, which are already underway. As a board we are now considering our next steps with respect to Childrens World.”
There are 21 stores affected, Childrens World Limited has a beneficial interest in the lease along side Mothercare UK Limited, all of them are branded as Mothercare stores and operating in large out of town locations.
Due to the size of these stores, many are among Mothercare’s highest turnover locations and in some cases the most profitable. Affected stores included Edmonton, Gateshead, Swansea and Romford.
This astonishing oversight could put an extra 300 jobs at risk of redundancy, in addition to the 800 jobs losses that will occur in the next 12 months.
Mothercare intends to continue as planned with other aspects of the restructuring that were previously announced, including issuing new shares and revised debt facilities.
The CVA can be challenged in the courts by creditors, up until 29 June 2018.